Fraud statute being weighed

U.S. law could be factor in probe of anti-crime unit

Not widely used in Maryland

Criminal code is meant to protect use of funds

August 27, 2002|By Gail Gibson | Gail Gibson,SUN STAFF

Authorities investigating a Maryland anti-crime agency overseen by Lt. Gov. Kathleen Kennedy Townsend are evaluating whether criminal charges could be brought under a broadly drawn law designed to protect the vast sums of money distributed each year through federal programs, sources and legal experts said.

The statute has been widely successful in public corruption cases in other states. It makes it illegal for an agent or employee of a local agency that receives U.S. dollars to use the money for any purpose other than for what it was intended. Sometimes referred to simply by its criminal code number - 666 - the law carries penalties of 10 years in prison and $100,000 fines.

P. Raymond Lamonica, a former U.S. attorney in Louisiana, said the statute is "very often what you use when you have program fraud. ... It lets the jury know this is not vague, broad wire fraud - it's designed just for this set of circumstances."

In Baton Rouge during the late 1980s, Lamonica said, his office used the law in a sweeping corruption probe focused on the misuse of federal dollars under the Section 8 housing program. In Florida and New York, federal prosecutors have successfully used the statute to bring cases involving improper use of Medicaid and Medicare dollars.

The law has not been widely used in Maryland, but experienced defense attorneys said it was logical that U.S. prosecutors would consider it in connection with the investigation of whether the Maryland crime-control office improperly used federal crime-fighting funds to pay for political tasks or ghost employees.

David B. Irwin, a Baltimore attorney, said the statute appeared to be "right on the mark."

"It may not be obvious, because we don't know the ins and outs of what they're looking at," said Irwin, who has represented a number of high-profile, white-collar criminal defendants and previously served as a federal prosecutor. "But I guarantee you, if you do anything wrong or immoral, they can find a federal statute that covers it."

Officials with the U.S. attorney's office in Baltimore and the FBI have refused to comment on any aspect of the grand jury investigation. But sources familiar with the investigation say prosecutors are looking at the Section 666 statute as a means of pursuing potential charges.

No charges have been filed in the federal grand jury investigation of the Governor's Office on Crime Control and Prevention, and no individuals have been publicly identified as targets.

The probe has come to light as Townsend, a Democrat, enters the final months of a close gubernatorial race in which she is expected to face Republican Rep. Robert L. Ehrlich Jr., who recommended U.S. Attorney Thomas M. DiBiagio for the post last year.

Townsend has dismissed the investigation as "political garbage," and praised the state agency as helping sharply reduce crime in Maryland.

The investigation dates to at least April, when federal officials subpoenaed a nonprofit group in Prince George's County for records of a $503,000 grant it received from the state office. More recent subpoenas, however, show authorities are taking a broad look at the crime-control office, which in recent years has been marked by a growing budget and staff.

Subpoenas issued by the grand jury show that the federal funds under scrutiny in the probe are administered through the U.S. Justice Department's multibillion-dollar grant division, which steers money to state and local governments for research projects, crime prevention programs, even hiring of more officers or police dogs.

Federal reports show the office awarded more than $5 billion last year across the country, including $122 million in Maryland.

State officials have said they are confident that federal investigators will find no wrongdoing in how that money was allocated. Executive Director Stephen P. Amos has defended the agency's workers, saying all of them were well-qualified and had clear assignments related to the agency's crime-fighting mission.

Federal guidelines also give states broad discretion in determining how to allocate grant money received through the Office of Justice Programs, complicating the work of federal investigators who are trying to determine whether funds were improperly spent.

Such problems are anticipated, however, by Section 666 of the U.S. criminal code. When it was adopted by Congress in 1984, legislative records show that lawmakers intended the statute to be broadly construed and used specifically to protect the billions of federal dollars distributed each year through various federal programs.

A Senate report noted in many cases, prosecution of improper use of federal funds wascomplicated because the money typically is commingled with funds from state agencies or nonprofits,